According to a survey by Bankrate Inc., Georgia and Tennessee rank below the national average when it comes to closing costs. Tennessee is the 35th most expensive state with an average of $3,817, and Georgia trails it at 36th with an average of $3,796. I know this comes as a shock, but the Empire State came in as the priciest place to get a mortgage. New Yorkers pay an average of $6,183 when they close on a mortgage loan. Ouch!
Here's a guide to some of fees you can expect at the closing table, courtesy of the Federal Reserve Board.
- Application fee: covers the initial cost of processing your loan request and checking your credit report.
- Loan origination fee: charged by the lender for evaluating and preparing your mortgage loan. This fee can cover the lender's attorney's fees, document preparation costs, notary fees, and similar charges.
- Points: One-time charge that can be negotiated with the lender. One point equals one percent of the loan. Usually, the more points payed up front, the less interest payed over the life of the loan.
- Appraisal fee: the lender wants to make sure the home being purchased is worth at least the loan amount.
- Lender-required home inspection fees: some lenders require tests that address termite damage, structural soundness, water quality, and septic system condition.
- Prepaid interest: even though your first mortgage payment is usually due six to eight weeks after you close, your interest fees start as soon as you sign on the dotted line. The amount depends on when you close; if the date is the 15th, you owe for 15 days.
- Private mortgage insurance (PMI): if your down payment is less than 20% of the value of the house, the lender usually requires PMI. This can be cancelled at your request when you reach 20% equity, or it automatically goes away when you reach 22%.
- FHA, VA, and RHS fees: since these loans require a reduced, sometime zero down payment fees similar to PMI are charged.
- Homeowner's insurance
- Escrow/Reserve funds: an escrow account set asides money for for property taxes, homeowner's insurance, and flood insurance (if applicable).
- Assumption fees: sometimes charged when a buyer is assuming (taking over) an existing mortgage.